MSP for eligible crops is calculated by Commission for Agricultural Costs and Prices (CACP) which defines production costs as A2 – actual paid out cost, A2+FL – (actual paid out cost plus imputed value of family labour) and C2 (comprehensive cost including imputed rent and interest on owned land and capital). This means that C2 includes the cost of land and C2 > A2+FL > A2. The difference between C2 and A2+FL is substantial. The Swaminathan Commission report also mentions that cost of production is C2 and not A2+FL. When PM Modi says that 1.5 times the cost has been granted, one must take into consideration that the cost mentioned here is A2+FL and not C2. Even in 2014, the MSP was more than 50% of the cost (A2+FL). Returns over C2 in 2017-18 rabi season were less than 50% of C2.
On the other hand, Fasal Bima Yojana launched by PM Modi is also riddled with flaws. 95% of claims have been unpaid despite nine months after the Kharif season. The insurance companies are the only ones who seem to benefit from this scheme and not the farmers.
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